1.28.2004

Hulbert on politics

As usual, another great article. Here are some excerpts for non-Marketwatchers:

"The gist of what those pundits are saying: Howard Dean's recent fall from grace and John Kerry's resurrection are bad for the stock market.
Their argument runs something like this: Because President Bush would trounce Howard Dean in a general election, and because the stock market would undoubtedly fare better during another Bush presidency than in a Dean administration, investors were quite happy so long as Dean appeared to have a near lock on the Democratic nomination.
The situation took a turn for the worse when John Kerry assumed front-runner status. Investors presume that he poses a more formidable obstacle to President Bush's re-election than Dean, and that his revival therefore makes it more likely that the stock market will have to endure a Democratic presidency.
There's just one problem with this analysis, however: It is based on a faulty reading of history."

I've almost regurgitated lunch a time or two when the geezers on CNBC spouted those claims off. They clearly had no evidence for this, and they weren't called on it. Something tells me they're really just interested in their fat taxcut. So here's the facts:

"Since 1901, the Dow during Democratic presidencies has risen at an average annualized rate of 7.2 percent, almost double the 3.8 percent average rate of increase during Republican presidencies."

He goes on to argue that generally if Congress and the President are of the same party, the Dow does a little worse than when they're opposite. And even with inflation factored in, Democratic presidencies do better (2.6 vs 2.1 % growth). Today's column offers a follow-up. Excluding the two extremes: i.e. extremely good under FDR and extremely bad under Hoover, does this still hold true? Answer is yes:

"Here are the numbers: Since April 1945, the Dow Jones Industrials Average has appreciated at an average annual rate of 8.1 percent during Democratic presidencies, and 6.9 percent during Republican Presidencies.
In real terms, it is 3.8 percent vs. 3.1 percent, again in favor of Democratic presidencies."